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Smart Shopper Credit Scores and Vehicle Financing
945 messages, Last post on Dec 06, 2009 at 9:30 AM
You are in the Smart Shopper Forum. Your Hosts are kirstie_h & tidester
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Replying to: lemko (Apr 08, 2005 11:45 am) |
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Replying to: danf1 (Apr 08, 2005 11:50 am)
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Replying to: kirstie_h (Apr 11, 2005 8:29 am)  So, I called the bank on the card that i "selected" for this "honor" and had them increase the credit limit, so I would be under the 80% mark after the balance transfer 
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My fiancee and I just returned from car shopping. He wants to finance a 2005 Acura RSX S. We have figured out monthly expenses and determined that we can afford around 300$ a month for the car. He travels and easily puts about 30,000 miles on his car in a year so leasing is out of the question. But he would like to buy it and trade it up every few years. My question is if this is a bad trend to get into? It seems sensible to us for him to buy the car and we make the car payments every month with no intention of paying it off before trading it in. However, we are looking for advice as to if this is an unforeseen disastor. He graduated college about a year ago and I still have a year to go. We do not have much credit, but he has a steady income, our hope is to build credit through financing a vehicle in order to have enough credit to buy a house in 2 or so years. Although we dont have much credit, what we have is good. Any suggestions or advice on our scenario? Stop focusing on the credit and focus on how much of his hard-earned money he will be putting out in car payments in the next few years if he decides it's OK to be a perpetual financer. 300/mo over 60 months is 18 thousand dollars by itself, and if you trade it before it's paid off, roll over some negative equity, etc..., you could be spending 25-30K or more on vehuicle debt over the next 5-6 years. You really want a house in 2 years that badly? Buy the best used car you can get for cash or financed for no more than 3 yrs. Then put those big new car payments into your house fund. Is accepting perpetual car payments a potential financial disaster? I believe so. Go to a retirement calculator some place like bank-rate.com, plug in 300 dollars per month over 20 yrs, 30 yrs, etc... and see how rich that car payment money could be making you if it wasnt paying off a vehicle. Having good credit is nice and definitely important, but it's only an effective tool if you accumulate lots of cash to go along with it and minimize the amount of interest you pay for consumer goods. Paying a ton of interest in order to get a good credit score that will allow you to pay less interest is kind of...defeating the purpose of trying to maximize the credit score. Concentrate on paying credit cards off in full every month instead. Once my Dodge Dakota is paid off will be keeping it a few more years and diverting those car payments directly to savings and investments. I look forward to using it to make me rich for awhile instead of helping make a finance company richer. |
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Replying to: danf1 (Apr 08, 2005 11:50 am)
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Replying to: tenexe (Apr 21, 2005 10:38 am) And, usually end up much wealthier in the long run... Paying off debt and closing credit lines is a net positive, no matter how you figure it. regards, kyfdx |
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one big measure of credit scoring is the spread between debt and available credit. as Tenexe mentioned, closing accounts can have a big negative impact on the credit score. of course if you can't be trusted to have credit cards then eliminating them may be more important step to financial security. kyfdx...I agree in theory with your post but those who can manage their credit are often better off wiping out the debt but keep open the lines of credit.
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Replying to: audia8q (Apr 21, 2005 12:53 pm) In the lender's point of view, once you get the credit you are applying for, you might also max out your other available lines, so, yes, IMHO, it might hurt you, not in the credit score per se, but in the internal score that the lender might calculate to determine rates and conditions. |
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scores are calculated, not the attitudes of the lenders...
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What's this, "available balance" is a non-term to me. You have a "balance" and a "credit limit". "Available credit" is the difference b/w credit limit and balance". Are you trying to say that the national average of available credit to credit limit is 34%, meaning that on a $10,000.000 limit card the average balance is $6,600.00 with $3,400.00 credit "available"?? or is it the other way around. If I had 64% of $120,000.00 total limits charged up, I could never make the payments
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